Free webinar: How to survive a layoff
This webinar reviews how you can steady your finances if you are laid off or anticipating a layoff. Especially in the wake of the COVID-19 economic downturn, this survival guide has info that will help you keep debt to a minimum while searching for a new job.
Welcome to Debt.com’s webinar. So what does it mean to stay ALOFT? When we talk about staying ALOFT at Debt.com, we’re talking about helping people financially survive the coronavirus shutdowns, even if that means they’ve lost income because they’ve been furloughed or laid off.
Or maybe you’re working at home and worry about stretching your household dollar. Even if you’re earning a full salary right now, you could feel threatened by the awful possibilities should the shutdown drag on. We’re going to give you concrete, proven ways to get through this difficult time.
According to the St. Louis Fed, we could see a third of all American workers unemployed for at least a little while. And the consulting firm McKinsey & Company says it could take three full years before we see the same economic growth we were experiencing before all this started.
We all know that the shutdown has devastated the economy. But it could get a lot worse before it gets better. Even before COVID-19, nearly 8 in 10 American workers lived paycheck to paycheck, according to a survey by the jobs website CareerBuilder. Another poll by Bankrate is even scarier: 6 in 10 Americans don’t have $1,000 to pay for emergencies. Finally, before this pandemic, the average credit card debt per household in this country was just over $16,000, according to Discover.
Now, we’ll review three topics. They’re not mutually exclusive, either. In other words, you can combine them. You can use all three to emerge from the shutdown with a minimal amount of financial pain. Let’s review them now.
Let’s start with the complicated and feared government agency: the Internal Revenue Service. So you probably heard that the IRS moved its traditional income tax deadline from April 15 to July 15. But that’s not all they’re doing. The IRS also designed a new program to help out taxpayers facing a slew of other problems.
Thankfully, the IRS has responded with a coronavirus program called the People First Initiative. The IRS describes it as “a sweeping series of steps to assist taxpayers by providing relief on a variety of issues.” Let’s take a quick look at some of those steps.
Many Americans who owe the IRS pay off their tax debts in two ways. The first is an installment agreement, which is just what it sounds like. You owe the IRS a lot of money, and you pay it back a little each month. Under the People First Initiative, your payments due between April 1 and July 15 are suspended. Even better the IRS will not default any Installment Agreements during this period. But there’s a catch: Whatever balances you don’t pay, interest keeps accruing. So you’ll eventually have to give the IRS more money.
The second way to pay off tax debt is with an Offer in Compromise. And OIC lets you actually pay back less than you owe, although there are numerous downsides we won’t get into here. You can call Debt.com, if you need more information and we’ll explain both the pros and cons to you.
If you have a pending OIC application, you have until July 15 to get all the paperwork done. If your OIC has been accepted, you can suspend payments until July 15. Then again, interest will continue to accrue on your unpaid balances.
Almost all of the scariest stuff the IRS does – assessing liens, levies, and even seizing personal residences – has been suspended till July 15. Also, “New delinquent accounts will not be forwarded by the IRS to private collection agencies to work during this period.” So the IRS is suspending its own collections and not telling private collection agencies anything about you for a few months.
Obviously, we’ve just scratched the surface here. This is the IRS, after all. The IRS loves rules and fine print. So visit IRS.gov and search “people first.” Or call Debt.com and we’ll help you find out what parts of People First you qualify for, and which are the best options for you. We can explain these provisions in more depth.
Next we want to talk about student loans – which is, after mortgages, the biggest form of debt in the country – YES – even more than credit card. As part of the CARES Act federal student loan holders are also getting a break.
With 43 million Americans paying off federal student loans, these breaks are big. First you’re not required to make payments again until at least October. Second, interest rates were cut to 0 percent as of March 13. Currently, this is set to last through September. When October comes, your interest rates will go back to normal, and maybe your payments will return, too. But it’s hard to say, because the situation is so fluid. The White House and Congress might extend or modify these terms.
About 30 million Americans have mortgages backed up by the federal government. For those people, there are several key benefits available. They include no foreclosures until May 17 and possibly longer, and something called a “forbearance plan” that can freeze your mortgage payments for a year and get rid of late fees. You can also modify your loan so you pay less per month, and best of all, none of this will negatively affect your credit score.
If you have a mortgage through Fannie Mae or Freddie Mac, which are two federally backed mortgage companies, you can call for more details. Like everything else we’re talking about today, your options depend on your circumstances.
You probably already know that unemployment benefits are run by your state. If you’re out of work, we encourage you to check with your unemployment office. But don’t forget that cities and counties offered benefits even BEFORE the shutdown, and you can still use them. In fact, the biggest problem during better times was that many Americans just didn’t bother to look into them. We’re talking about utilities that can cut your water or electric bill by half or more if you qualify as low income – which is common today. These government programs also extend to free home repairs and even meal deliveries. Check with your city or go to benefitscheckup.org. And of course, city and county governments are beefing up these existing programs to help during the shutdown. So it’s worth a few minutes to look them up.
I’m sure you’ve noticed we haven’t talked at all about the $1,200 stimulus checks and $500 per dependent child that have been going out. There’s not much to say here, except that Debt.com hopes you won’t view these checks as found money. One national poll found that 42 percent of Americans plan to spend their stimulus checks on food. That represented an overwhelming plurality, because the next big item – at only 16 percent – was starting an emergency fund.
Since Debt.com is a solutions company, I bet you can guess what we’d recommend for your stimulus check. If you don’t need the money for basic living expenses, we can help you use it to pay down your credit card bills. Credit card interest rates are sky-high, averaging over 20 percent. If you want to learn more about paying off debt, you can call us for a free debt analysis, but now we are going to move on to talk about banks and credit unions.
We have yet to hear about a bank or credit union that ISN’T helping their customers and members during this pandemic. The specifics vary by institution, but here are some examples: Truist has suspended ATM surcharges – BB&T and SunTrust joined to create Truist Bank – PNC Bank has suspended foreclosure sales and vehicle repossessions, and Navy Federal is waiving fees for early CD withdrawals. These benefits are being tweaked and extended as banks and credit unions assess the economic impact of the shutdown. So go to their websites and then make a call.
We mentioned forbearance earlier when we were talking about mortgages, but they apply to credit cards, too. Remember, “forbearance” is just a fancy way of saying “temporary financial relief.” The details vary with the card, but generally, these allow you to lower or even eliminate payments, waive late fees, and lower your interest rate. There’s a downside, though. Like we mentioned with some IRS tax benefits, your overall debt doesn’t go down, and you might still accrue interest on the unpaid balances that you’ll have to pay off later. So you need to do the math and see if you really benefit from these forbearance programs. Now let’s talk about how you might be able to make money…
Grass still grows, even in a troubled economy. And lots of people hate to mow their lawns. Put the word out to friends and neighbors and on neighborhood Facebook groups or apps. You’ll be surprised how quickly you can earn enough to pay some monthly bills.
Did you know you can earn up to $22 an hour teaching English as a second language (ESL) online to Chinese students? Online tutoring could be an option if you speak native-level English, have a bachelor’s degree, a good internet connection and a decent laptop with a camera, microphone, and earphones. A simple web search will show you a dozen companies looking for tutors.
Even in a troubled economy, some industries are busier than ever. For example, health insurance companies need more people to take calls and review claims. You may be able to find part-time remote call center work in many industries, including order fulfillment, marketing, and streaming providers. You won’t get rich on $10 to $15 an hour but you’ll have a steady income, and that’s worth a lot during troubled financial times. Check the usual jobs sites under part-time.
We’ve all heard, and many of us have received stimulus checks from the federal government. And many are receiving unemployment from state governments. But did you know city and county governments offer their own programs?
Many cities and even small towns offer utility discount programs if your low-income. You may even qualify if your income was only recently cut or eliminated. For example, Columbus, Ohio offers a 20% discount on water and sewer charges and a payment relief program with a one-time credit up to $150 towards an electric bill. There are also programs to help you pay for home repair and even deliver meals to you. Check our city and county government websites to learn more.
Churches, synagogues and mosques are running food pantries and offering help paying bills, utilities or other financial assistance. For most, it doesn’t matter if you’re a member of their congregation or even a member of their religion. Ask friends, neighbors, and family if they know of local programs. You can also call local churches, temples and mosques or visit their websites to learn about programs available.
It’s tempting when budgets get tight to seek loans. But be careful. If you take from your 401(k), you’re borrowing against your future. If you take out a home equity line of credit, you risk losing your home. Personal loans are tough to get right now, but if you must get money from somewhere, that’s better than going to your credit cards, where the interest rates are outrageous – and you’ll find yourself right back in the same hole again.
If you carry a balance, make sure to pay at least the minimum required. Why is that so important? Because 35 percent of your credit score is determined by payment history – that is, paying your bills on time. It also means you avoid steep late fees. If you don’t have the money to pay all your bills, skip your utilities. First, those don’t count against your credit score, and second, municipalities are cutting residents slack through the shutdown. And speaking of slack, call your credit card company and ask what they can do for you. Right now, many are offering special programs that will delay payments without penalty.
We saved this for its own slide, because it sounds so weird. Why isn’t closing old cards the responsible thing to do? Well, because credit history is also a big factor in your credit score. It represents 15 percent of it. Thing is, creditors like to see you in a long-term relationship with your credit cards. It shows your responsible. Also, there’s the credit utilization ratio. Basically, you want to try to keep that to 30% of your available credit or less. For example, if a person has $20,000 of available credit, they should only be carrying 30% – which is $6,000 or less – to have a good ratio that’s optimal for a good credit score.
If you’re using your credit cards to pay bills right now, use the card with the lowest interest rate first. A few dollars saved anywhere are worth it! And pay attention to your transactions’ interest rates. That means avoiding cash advances. If your credit card has a normal interest rate of 12%, a cash advance will come with an interested rate almost double that.
Lenders may have several options for COVID-19-related relief. They can place your account into forbearance or deferment. You have ask for this provision, however. You can also add a special statement to your credit reports, showing that you’ve been affected by a natural or declared disaster. This appears as a neutral mark in some credit scoring systems. Do this early if you are expecting to have a hard time with bills. It will better protect your credit score.
If your finances have been impacted by the recent health crisis there are many programs that you may qualify for that will help you navigate your way out of financial hardship.
Call Debt.com at 1-800-849-DEBT that 800-849-3328 – to explore your options. We’re here to help… Thank you for being with us today and we hope that your health and finances are staying strong.
5 extra tips for surviving layoffs
#1: File for unemployment early.
The earlier you apply, the earlier you’ll receive your benefits.
Take a look at these 6 things to know before you apply for unemployment insurance.
#2: Take care of your health insurance and other benefits.
Most people get their insurance and retirement plans through their employers, so a layoff can mean not only a loss of income but also a loss of important benefits.
#3: Reassess your budget.
Your income changed, so your budget should, too. Cut expenses in accordance with the income you lost. Keep saving at the top of your mind.
#4: Get more help if you need it.
Seek out other ways to get help if your unemployment checks aren’t cutting it. Talk to friends and family about borrowing money or find a community charity or church that can assist you.
However, avoid leaning on your credit cards during this time. You could increase your credit card debt and make it harder to pay off even when you get a new job.
#5: Start your job search.
Update your resume and online profiles. This is something you should be doing regardless of your job status.
Talk to recruiters and check job boards. You may not have done this for a while, but don’t let it overwhelm you.
Is job loss worsening your credit card debt? Talk to a debt professional now.
Article last modified on April 14, 2023. Published by Debt.com, LLC